New York Old Master dealers Salander-O’Reilly are expected to file for bankruptcy after a state judge ordered their gallery to be closed indefinitely.

New York Supreme Court Justice Richard Lowe III toured the five-storey Manhattan townhouse on East 71st Street on Friday, October 19 accompanied by lawyers involved in nearly two dozen claims against the gallery and proprietor Lawrence Salander. The tour was aimed at ensuring all assets in the building, now under 24-hour surveillance by court-ordered private guards, were safeguarded.

As reported last week, the doors had been locked on October 11 but reopened on October 16 as Salander tried to go ahead with a double exhibition titled Masterpieces of Art: Five Centuries of Painting & Sculpture and Caravaggio.

However, London-based partner, dealer Clovis Whitfield, lost confidence in the venture and had the 41 artworks he contributed to the show removed just hours before opening night. These paintings included Apollo the Lute Player, apparently “the only major Caravaggio remaining in private hands”.

Lawrence Salander was reported to have suggested to the New York Sun that the painting would be for sale in the region of $100m, but British public relations firm Sue Bond, who represent Clovis Whitfield, countered that claim with the statement: “Whitfield Fine Art would like to affirm that [the painting] is not owned by Salander-O’Reilly Galleries, nor is it for sale.”

An accord had been reached with two of Salander’s creditors, hedge-fund executive Roy Lennox and New York investor Donald Schupak, in an effort to proceed with the exhibition.

Judge Lowe tentatively approved the partial settlement, in which Lawrence Salander agreed to relinquish 642 artworks to an investment vehicle owned by Mr Schupak named Renaissance Art Investors as well as a further six works and his library to Mr Lennox. However, 11 people lodged claims on the art included in the accord at the latest hearing before Judge Lowe.

The suits against the gallery are now thought to total more than $40m and they accuse Salander of defrauding clients, failing to remit proceeds of sales of art on consignment and reneging on debts.

On October 19, one of his lawyers, David Mollon, said a filing for bankruptcy was likely.

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